The Pentagon on Monday designated Chinese social media and gaming giant Tencent as a Chinese military business operating in the United States. This is the latest step in a series of escalating acts of retaliation between the world's two largest powers.
Tencent shares in the US fell nearly 10% after the Pentagon's decision also targeted Chinese battery, drone and shipping companies.
The Department of Defense annually updates a list of Chinese military companies it has identified as possessing both military and commercial technology. The list published in the Federal Register currently includes 134 companies. It also added Contemporary Amperex Technology Company, known as CATL, and China Overseas Transportation Division, known as COSCO. chipmaker Changxin Memory Technologies; and drone manufacturer Autel Robotics. China Overseas Shipping is one of the world's largest shipping companies.
Adding Tencent to the list was a “clear mistake,” a company spokesperson said in an emailed statement. “We are not a military company or military supplier.”
Tencent also said the listing “will have no impact on our business” and that it will “work with the Department of Defense to address any misunderstandings.”
The designation is a warning to U.S. companies that working with companies on the list could result in them being barred from future Department of Defense contracts.
To be added to the list, a company must have some business activity in the United States. For example, CATL licenses its battery technology to US automaker Ford Motor Company. Ford Motor Co. is building a $3.5 billion electric vehicle factory in Michigan.
Shares in Hong Kong-listed Tencent and CATL, which trades in Shenzhen, China, fell in Asian trading.
CATL did not immediately respond to a request for comment.
As tensions between the United States and China have escalated in recent years, there has been increasing pressure from lawmakers to find ways to thwart China's advances technologically and militarily.
In 2021, Chinese consumer electronics company Xiaomi won a lawsuit in federal court asking the Department of Defense to remove it from the blacklist, claiming it had no ties to the Chinese military.
Recently, both countries have escalated their economic retaliation. It began during President-elect Donald J. Trump's first term, after he took aim at China with tariffs and trade restrictions. At the time, the Chinese government took a largely symbolic and measured response in retaliation.
Since then, the Biden administration has expanded regulations on Chinese companies, imposing a ban on dual-use products and recently targeting 140 Chinese companies. On Thursday, the administration announced it was considering new rules that would limit or ban the use of Chinese drones in the United States.
The Chinese government has taken an increasingly aggressive stance in the run-up to the election of Mr. Trump, an outspoken critic of China and its economic power, for a second term.
Chinese regulators announce investigation into U.S. computer chip company Nvidia, ban exports of rare minerals to the U.S. and become more targeted at individual companies to expose vulnerabilities in supply chains We conducted an investigation.
Treasury Secretary Janet L. Yellen and Chinese Treasury Secretary He Lifeng held virtual talks on Monday, the latest in a series aimed at fostering talks between economic policymakers from the two countries. According to a statement from the Ministry of Finance, both sides expressed concern over rising economic tensions. In a statement, Yellen warned that China's policies that affect American businesses and workers will continue to have a negative impact on U.S.-China relations.
According to Chinese state media, Mr. He expressed concern about the US government's economic and trade restrictions with China.
